It doesn’t really affect domestic law in other parts of society, like health or crime, but it tells firms what standards they have to produce to and forces countries to take those products, regardless of whether governments or companies want them. This recognition of standards reflects a key part of what makes trade work. It is something which presents one of the greatest dangers to Britain when it pulls away from Europe: non-tariff barriers.
In recent years, as tariffs erode away, it is non-tariff barriers which preoccupy the thoughts of trade experts. Non-trade barriers are obstacles to trade outside of taxation. Some are insurmountable, like language. Others are not.
Mutual recognition agreements are key to overcoming some of these problems. When two countries sign these agreements they acknowledge each other’s standards and paperwork on product testing and conformity in certain areas of their economy.

…

There was simply no way to square this with any approach other than leaving the single market. But this was not simply a plan for WTO rules. It was clear that Davis wanted to secure a trade agreement with the EU before leaving. In response to a question from Tory backbencher John Redwood on tariffs, he replied: ‘It is not just tariff barriers. We also have to negotiate non-tariff barriers. It is… in both Europe’s interest and our interest to have tariff-free and non-tariff barrier based trade. That is where the jobs are.’
Two days later, during prime minister’s questions, May said: ‘What we are going to do is be ambitious in our negotiations to negotiate the best deal for the British people – and that will include the maximum possible access to the European market for firms to trade with and operate within the European market.’

…

The scale of it is almost beyond comprehension, and experts – much derided during the campaign but highly sought after by Whitehall once the work had to be done – warn that it will probably take a decade or more to complete satisfactorily.
Trade Brexit
Should Britain stay in the single market, we will not need a trade deal. But if we do leave the single market we will need some sort of post-Brexit trading arrangement with the EU, or we will see the return of tariffs and non-tariff barriers to our largest market.
People often assume that Article 50 covers administration, the law and trade. It actually only covers administration. The legal puzzle is Britain’s problem. Trade agreements – which come under the euphemism ‘future relationship’ – are something the EU member states are only expected to be ‘taking account of’.
‘Taking account of’ is wonderfully woolly phrase, giving the EU maximum flexibility.

But for developing countries in particular, this decrease went
together with the introduction of a set of non-tariff barriers whose effect
has also been to distort trade exchanges. ‘Non-tariff barriers’ refers to a
set of measures such as quantitative restrictions (quotas for example),
sanitary and phytosanitary standards, quality standards, administrative
and customs procedures, non-tariff charges, etc. While some of these are
justified by legitimate concerns (for example sanitary and phytosanitary
standards), others may be motivated by protectionist concerns (for
example, restrictions linked to ‘rules of origin’). In order to limit their use,
the World Trade Organization (WTO) recommends that these non-tariff
barriers be converted into customs tariffs that provide an equivalent level
of protection. This process, called ‘tarification’, has led to the following
paradox: countries that agreed to lower their tariff barriers sometimes
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inequalities of the trade system
ended up with higher tariffs than those used before the agreements on the
reduction of tariffs (Stiglitz and Charlton, 2005: 49–50).

…

.); however, tariff escalation applies at each phase of
their processing;
• primary products for which the North competes with the South
(cotton, sugar, rice, etc.) are generally subsidised and/or submitted to
tariff peaks;
• manufactured products for which the South has a comparative
advantage face tariff and non-tariff barriers (quotas, restrictions on
rules of origin, etc.).
In order to measure the combined impact of the distortions induced by
these various trade policies, a number of indicators were developed, such
as OTRI (Overall Trade Restrictiveness Index) and MA-OTRI (Market
Access Overall Trade Restrictiveness Index). Four lessons can be learnt
from estimates given on these in the Global Monitoring Report (World
Bank and IMF, 2008, 2009).
First, the levels of trade protection remain relatively high everywhere
in spite of a downward trend. As a general rule, agricultural products
are more heavily taxed than manufactured products. Second, non-tariff
barriers have a more restrictive effect on trade than customs tariffs. Third,
tariff and non-tariff barriers remain high on products for which LDCs
have a comparative advantage.

…

Although this statement may be taken for granted, the issue remains:
what is the implication of the efficiency diktat? Without a doubt, it means
that the costs of production must not be so prohibitive that FT products
cannot find buyers.
At any rate, a mechanical relationship between ‘efficiency’ and ‘price
competitiveness’ is assumed. Yet, many social determinants come into
play in order to loosen the link between these two aspects: exchange rates,
tariff and non-tariff barriers, etc. Some producer groups can be ‘inefficient’
from the point of view of ‘production’ while being ‘competitive’ from
the point of view of price, and vice versa. A ‘lazy’ state may for instance
manipulate its exchange rate in order to inject ‘artificial’ price competitiveness into domestic products that would probably not be available on the
international market without these distortions.

However, the actual history of successful industrial development in Japan, Korea and Taiwan shows that at critical policy junctures each country increased regulation and protection to defend new industries. This occurred in the early 1960s in Japan, when the country instituted large tariff increases to defend new businesses being nurtured by MITI.234 And it happened in Korea and Taiwan in the 1970s when those states implemented their heavy industry drives. The same may now be underway, using non-tariff barriers, in China, despite the country’s 2001 accession to the World Trade Organisation.
Perhaps the biggest, though rarely voiced, fear among historically literate economists at the IMF and the World Bank is that whenever industrial policy has been successful in the past, it has tended to lead to chronic trade surpluses. These in turn make for damaging imbalances in the global economy. Britain in the nineteenth century, the US in the first two-thirds of the twentieth century, and Germany and Japan from the late twentieth century to this day each ran big, sustained trade and current account surpluses once they became leading industrial powers.

…

Meanwhile, Korea’s GDP per capita in 2010 stood at USD20,600, double the level in 1997; its stock market, thanks to the Anglo-Saxon medicine, is a regional outperformer; and its consumers are finally beginning to enjoy the fruits of development in the form of cheaper consumer goods, better services and foreign holidays.243
One hesitates to declare that the timing of the IMF reforms in Korea was good. For one thing, some of the success of the Korean economy in the wake of 1997 reflects the government’s continued culling of weaker chaebol and effective use of non-tariff barriers to foreign competition, in line with traditional industrial policy.244 However, it is clear that the timing of the reforms in Korea was vastly better than that of the deregulation and privatisation instituted by the IMF in the Philippines in the 1980s, or in Thailand and Indonesia after the Asian crisis (not to mention IMF-like changes instituted unilaterally in Malaysia since Mahathir’s departure in 2003).

…

Already, Huawei lost out on a USD3 billion sale to Sprint-Nextel in the United States in 2010, and has been blocked from acquisitions which would have yielded it important technology on the basis of ‘national security’ concerns.41 Such impediments may affect more Chinese mid-stream firms in the future. Even if national security concerns are not invoked, developed country governments can deploy all kinds of other ‘non-tariff barriers’ to impede Chinese equipment sales. Since China does not itself operate open tenders for state procurement, and has not acceded to the WTO’s General Procurement Agreement (which regulates government purchases), the Chinese government has no legal recourse in such matters. Private firms from Japan and Korea have been able to enter rich countries by appealing direct to their consumers with cars, video cassette recorders and smart phones.

By the time the legislation reached the Senate, foreign ministries the world over sent protests to the State Department and boycotts were already under way; virtually all American economists of any stature-1,028 in all-signed a petition to Hoover pleading for a veto.30
To no avail. On June 17, 1930, he signed Smoot-Hawley into law and so set off retaliation and trade war. Covering tens of thousands of items, the bill seemed designed to offend every last trading partner. It deployed many "non-tariff barriers" as well. For example, bottle corks constituted about half of Spanish exports to the United States; not only did the new law increase the tariffs on corks to prohibitive levels, it also required that they be stamped with their country of origin, a process that actually cost more than the cork itself.
The act slapped high tariffs on foreign watches, particularly inexpensive ones that competed with American "dollar watches."

…

Over the centuries both sectors have acquired great expertise in politics and propaganda and have thereby managed to escape, at great cost to consumers, the rigors of the new global marketplace. In most countries, farmers have succeeded in portraying themselves as the "soul of the nation," in spite of the fact that they constitute no more than a small percentage of the workforce in most developed countries.
From the outset, the world's farmers and textile manufacturers were able to exclude themselves from the GATT framework and maintain high tariffs and, even more importantly, non-tariff barriers such as quotas, restrictions, and subsidies on both domestic production and exports.
The survival of protection for textiles and agricultural products has clearly cost the world's developing nations dearly, as these are the two areas in which they have the greatest comparative advantages. Exactly how and why this occurred is a matter of some controversy. One interpretation is that GATT is yet one more mechanism of rationing crumbs from the white man's table to the world's poorest nations, crippling them in precisely those areas in which they are best able to compete.

…

The president demonstrated his famous talent for multitasking by combining these sessions with telephone conversations. On only one occasion did he ask his dedicated young aide to leave the room so that he could answer a call in private. The caller was neither the British prime minister nor the pope, but Alfonso ("Alfie") Fanjul.56
Since the inception of GATT, virtually all nations have sidestepped its best efforts to lower barriers to agricultural trade-the rich nations with non-tariff barriers (mainly subsidies) and the poor ones with direct tar- iffs.57 After the September 11 attacks, the United States and Europe convened the Doha Round of GATT talks under the auspices of the newly formed World Trade Organization (WTO)-the successor to the ITO. The Doha Round explicitly sought to end all subsidies by 2013 in order to alleviate poverty in the developing world, the breeding ground for international terrorism.

Rules, not political considerations as such, were to govern the decision of whether a specific industry was eligible for protection.”8
What globalization in good part entailed in the 1980s and 1990s was the extension of this process of juridification to other states, above all through the US drive to overcome “non-tariff barriers.” The issue was clearly defined as early as 1971, in the Report to the President by the Commission on International Trade and Investment Policy (chaired by the CEO of IBM), which contended that the US had “not received full value for the tariff concessions made over the years because foreign countries have found other ways, besides tariffs, of impeding access to their markets.”9 By the late 1960s, in good part because of the significant flow of US manufacturing trade that already occurred within American MNCs’ global operations, they were already pushing strongly for the adoption of a “non-tariff barriers” strategy. But such barriers were seen as especially affecting the export of financial services (as well as communications, accounting, management, consultancy, and other such services) which, as we have seen, had already been identified inside the American state by the early 1970s as a key to solving balance-of-trade deficits.

…

With very few exceptions, the Treasury’s consistent and effective opposition to the use of countervailing duties in relation to investigations of unfair trading practices by other states through the crisis of the 1970s permitted it not only to fend off the implementation of domestic protectionist measures, but to use the threat of these as a lever for the liberalization of foreign markets, including in relation to what were increasingly being identified as “non-tariff barriers” associated with other states’ domestic regulations.78
As an internal Treasury memo on export policy and exchange rates put it in 1975, “a policy of international interdependence is politically unacceptable except where job losses through imports are offset by creating jobs in expanding export industries.” It especially stressed that, although the US enjoyed a comparative advantage not only in financial services but in those sectors where technology was most advanced, the examples of aircraft, computers, nuclear reactors, and synthetic materials showed that “the staggering cost of technology has reached levels that must be recovered from sales in excess of those that the domestic market can absorb.”

…

What was being targeted here was nothing less than a myriad of domestic laws and policies of other states—including the procurement practices, regulatory regimes, price controls, subsidies, and even general industrial policies—all of which could be designated as “unfair trade practices.”10 Unlike changes to tariff levels, agreements covering services, foreign investment, and intellectual property rights “required signatory governments to make substantive, and politically sensitive, changes to their domestic legislation and economic practices.”11 This focus on changing the domestic laws of other states to eliminate non-tariff barriers also contributed to containing protectionist pressures within the US by channeling them into much broader demands for liberalizing foreign markets, while at the same time complicating the conditions under which those affected at home could demonstrate unfair trade practices under the new juridified procedures.
But trade liberalization beyond tariffs also meant that the weakness of the GATT in ensuring effective implementation of international trade agreements now needed to be addressed.

Thus national policies promoted globalization mostly as a byproduct of widely shared economic growth along with some modest opening up. The success of the Bretton Woods era suggests that healthy national economies make for a bustling world economy, even in the presence of trade controls.6
Consider the long list of areas liberalization barely touched. Agriculture was kept out of GATT negotiations and remained riddled with tariff and non-tariff barriers—most infamously in the form of variable import quotas aimed at stabilizing domestic prices at levels much higher than in exporting countries. Most services (insurance, banking, construction, utilities, and the like) escaped liberalization as well. Manufacturing sectors that were liberalized but began to face significant competitive threat from lower-cost/higher-productivity exporters soon received protection rather than meet their fate.

…

Measured by these guidelines, China’s policies suggest a country that messed up big time, not one that became a formidable competitive threat in world markets. In brief, China opened up very gradually, and significant reforms lagged behind growth (in exports and overall incomes) by at least a decade or more. While state trading monopolies were dismantled relatively early (starting in the late 1970s), what took their place was a complex and highly restrictive set of tariffs, non-tariff barriers, and licenses restricting imports. These were not substantially relaxed until the early 1990s.
The Chinese leadership resisted the conventional advice in opening their economy because removing barriers to trade would have forced many state enterprises to close without doing much to stimulate new investments in industrial activities. Employment and economic growth would have suffered, threatening social stability.

pages: 443words: 98,113

The Corruption of Capitalism: Why Rentiers Thrive and Work Does Not Pay
by
Guy Standing

The construction of the global market system has been marked by a proliferation of over 3,200 bilateral and multilateral treaties on trade and investment, most of which have never been subject to any democratic mandate or accountability.34 This is nothing like an open market system, although many of the deals have been depicted as favouring ‘free trade’.
The Uruguay Round of trade negotiations that began in 1986 extended the scope of trade talks beyond tariff cutting to non-tariff barriers such as product health and safety rules, liberalisation of services and protection of intellectual property. These accords came into force in 1995 alongside the creation of the WTO. Although there has been no comprehensive multilateral agreement since then – the Doha Round launched in 2001 having run into the sand – there have been more than ten regional deals a year, on average, over that time.35 But trade deals are far outnumbered by bilateral investment treaties (BITs), part of a murky legalistic system creating a straitjacket favouring commercial interests.

…

It was in negotiation with the EU on a Transatlantic Trade and Investment Partnership (TTIP) and had just finalised lengthy negotiations on the mammoth Trans-Pacific Partnership (TPP), a far-reaching and controversial accord with Canada and ten Asian and Latin American countries accounting for 40 per cent of world output and a third of world trade.
The TPP, though still awaiting ratification, is especially significant as setting a template for future trade deals. It sets a high bar for reductions in tariff and non-tariff barriers to trade in goods, opens up markets for services, including banking and insurance, strengthens intellectual property protection and limits subsidies to state enterprises. While it obliges governments to comply with environmental and labour standards, enforcement provisions are predictably weak.
As one investment banking expert noted: ‘It is a mistake to call it a trade agreement. This is really an agreement that’s [sic] purpose is substantially to weaken nation-based regulation while at the same time strengthening intellectual property protections.’36
As is usual in trade agreements involving the USA, American interests prevail and mostly reflect corporate wishes.

The momentum of global trade negotiations has stalled in recent years—financial, social and environmental crises have dampened the growth-first rhetoric that once fueled them—but already 20 years of WTO negotiations and dispute settlement have broken down global trade walls. In advanced economies, average tariffs on imports are already near zero, and current regional trade initiatives, like the Trans-Pacific Partnership (TPP) between the US and 11 other states around the Pacific Rim, and the Transatlantic Trade and Investment Partnership (TTIP) between the US and the European Union (EU), aim to tear down many non-tariff barriers.*** Regional clubs—the EU (rededicated in 1993), the North American Free Trade Agreement (NAFTA, since 1994), the Free Trade Area of the Association of Southeast Asian Nations (ASEAN, 1992), the Southern Common Market (MERCOSUR, 1991) and the Southern African Development Community (SADC, 1992)—have deepened political and economic harmonization among close neighbors.
Only one country—North Korea—still rejects the notion of a global market.

…

The next two chapters show how it’s changing all of us.
Notes
* Here again, Europe lagged behind other civilizations. As early as 1402, maps in the court of Korea’s Choso˘n Dynasty demonstrated knowledge of Africa’s southern tip, likely of Arabic origin via trade with China.
** Specifically, the Caribbean. John Cabot, sent by the British, found North America in 1497.
*** Common non-tariff barriers include differences in how regulators of different countries treat similar products. For example, most US beef cannot be sold into the EU because many of the growth-promoting hormones used by ranchers in the former are banned in the latter.
**** The prize for the first use of movable type for printing properly belongs to Bi Sheng (990–1051), who developed such a system in China around 1040 AD.

The expansion of corporate political power is well exhibited in proposals for a general trade treaty between the EU and the US, the Transatlantic Trade and Investment Partnership (TTIP). TTIP is a plan for a major relaxation of barriers to trade between member states of the EU and the US. Most tariff barriers have already been negotiated away in various global agreements. What remain are the so-called non-tariff barriers. These extend from rules designed to keep international competitors out of domestic markets, to regulations to protect health, labour rights and various concepts of public and collective goods. What marks TTIP out from previous trade agreements is the attempt to end the exemption of public services from trade provisions.
Under current EU competition law governments can declare certain areas of social policy to be outside the market economy, defining them as services of general economic interest.

Factories in Asia could quickly adapt to slight product changes.65 Companies that could do so in the 1990s cut their costs by offshoring portable jobs, maximizing profit through lower input costs (it is estimated that labor costs are “58 to 72 percent lower in China and 22 to 62 percent lower in Mexico”), but at the same time contributing to American unemployment.66 Computers and telecommunication advances enabled companies to use smaller workforces to accomplish their goals, also helping to increase unemployment.67
Free trade became another vector of inequality during the Clinton administration, in the form of the North American Free Trade Agreement (NAFTA). NAFTA was designed to foster economic growth throughout the United States, Canada, and Mexico by lowering tariff barriers. After NAFTA, the value added to American manufacturing by Mexican assembly plants, or “maquiladoras,” tripled.68 “By 1999, tariff and non-tariff barriers had been removed on 65 percent of goods … and the value of trade between the USA, Mexico, and Canada trebled between 1993 and 2007. Inward foreign direct investment increased fivefold over the same period.”69 This prosperity was not equally shared, however. NAFTA disadvantaged low-waged workers in the United States who were doing the sorts of assembly work that could be outsourced south of the border, and even Mexican workers employed by the new maquiladoras found that their wages fell.

In simple terms, the United States dropped most of its protectionist import barriers while allowing Germany, Korea and Japan to protect their markets. These nations used very similar trade barriers to those the United States had employed prior to 1945. The United States embraced free trade, at least to a degree, but encouraged its former enemies to rebuild their economies behind a protective wall of tariff and non-tariff barriers and quotas.
The Bretton Woods Agreement of 1944 and the multilateral trade framework created under the auspices of the United States essentially allowed the participating nations to peg their currencies to the dollar and direct their attention and resources to domestic economic recovery. By basing the post-war world on the dollar and gold, the Allies sought to avoid competitive currency devaluations between nations and thereby sidestep the sharp swings in growth and reserve balances that had characterized the pre-WWII period.

Morgan takes note of “the hypocrisy of the rich nations in demanding open markets in the Third World while closing their own.” He might have added the World Bank report that the protectionist measures of the industrial countries reduce national income in the South by about twice the amount provided by official, largely export-promotion, most of it to the richer sectors of the “developing countries” (less needy, but better consumers). Or the UNCTAD estimate that non-tariff barriers (NTBs) of the industrial countries reduce Third World exports by almost 20 percent in affected categories, which include textiles, steel, seafood, animal feed and other agricultural products, with billions of dollars a year in losses. Or the World Bank estimate that 31 percent of the South’s manufacturing exports are subject to NTBs as compared with the North’s 18 percent. Or the 1992 report of the UN Human Development Program, reviewing the increasing gap between the rich and the poor (by now, 83 percent of the world’s wealth in the hands of the richest billion, with 1.4 percent for the billion at the bottom of the heap); the doubling of the gap since 1960 is attributed to policies of the IMF and World Bank, and the fact that 20 of 24 industrial countries are more protectionist today than they were a decade ago, including the US, which celebrated the Reagan revolution by doubling the proportion of imports subject to restrictive measures.

The idea behind that Reagan administration effort, known as Project Socrates, was to figure out why America’s foreign competitors were succeeding in establishing highly efficient, thriving corporations while their US counterparts were withering. The team found that foreign firms based in Japan, France, Germany, and other developed countries enjoyed a wide spectrum of advantages that allowed them to trounce US companies: government assistance, generous subsidies, R&D initiatives, industrial intelligence gathering, and unofficial non-tariff barriers. The project’s mission was to then map out a strategy of industrial and technological development that would allow the United States to close the gap.40 The effort was shut down under the Bush administration, but it’s a battle that is in many ways still being fought. It is also one that, ironically, brings together political forces from both sides of the aisle. Not only liberals like Elizabeth Warren, for example, but even some conservatives worry about the transatlantic and transpacific trade deals currently in the works (the so-called TTIP and TPP).